Robert D. Geringer v. D. Ray Strong

MOTION for Summary Judgment and Memorandum in Support

D. UtahApril 26, 2017

i Milo Steven Marsden (Utah State Bar No. 4879) Peggy Hunt (Utah State Bar No. 6060) Sarah Goldberg (Utah State Bar No. 13222) John J. Wiest (Utah State Bar No. 15767) DORSEY & WHITNEY LLP 136 South Main Street, Suite 1000 Salt Lake City, UT 84101-1685 Telephone: (801) 933-7360 Facsimile: (801) 933-7373 Email: marsden.steve@dorsey.com hunt.peggy@dorsey.com goldberg.sarah@dorsey.com wiest.john@dorsey.com Attorneys for Defendant D. Ray Strong, Liquidating Trustee IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION ROBERT D. GERINGER, Plaintiff, v. D. RAY STRONG, IN HIS CAPACITY AS LIQUIDATING TRUSTEE OF THE LIQUIDATING TRUST FOR THE CONSOLIDATED LEGACY DEBTORS, THE LIQUIDATING TRUST FOR CASTLE ARCH OPPORTUNITY PARTNERS I, LLC, AND THE LIQUIDATING TRUST FOR CASTLE ARCH OPPORTUNITY PARTNERS II, LLC Defendant. MOTION FOR SUMMARY JUDGMENT AND MEMORANDUM IN SUPPORT Case No. 2:16-cv-00391-TC The Honorable Tena Campbell Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 1 of 58 ii TABLE OF CONTENTS I. INTRODUCTION ...............................................................................................................v II. BACKGROUND ............................................................................................................... vi A. Mediation with Geringer. ....................................................................................... vi 1. The Smyrna Property. ................................................................................ vi 2. Relevant Terms of the Pre-Existing Purchase Contract with DSSIII. ...................................................................................................... vii 3. Geringer Mediation Focuses on Smyrna Property. .................................... ix 4. The Term Sheet with Geringer. ...................................................................x B. The Settlement and Sale Agreement. .................................................................... xii 1. The Term Sheet Compared to the Settlement and Sale Agreement. ......... xii 2. Provisions Regarding Termination of the DSSIII Agreement. ................ xiv 3. The Parties’ Communications Between the Term Sheet and Execution of the Settlement and Sale Agreement. .....................................xv 4. The Trustee’s Communications with DSSIII .......................................... xxii 5. Proceedings Before the Bankruptcy Court. .............................................xxv III. STATEMENT OF ELEMENTS AND UNDISPUTED MATERIAL FACTS ...............xxx A. The Term Sheet Is Not A Binding Contract. .......................................................xxx 1. Statement of Legal Elements ...................................................................xxx 2. Statement of Undisputed Material Facts ................................................ xxxi B. To the Extent Bankruptcy Law and Failure of Express Conditions Did Not Render the Term Sheet Inoperative, It Was Superseded by the Settlement and Sale Agreement. ......................................................................................... xxxii 1. Statement of Legal Elements. ............................................................... xxxii 2. Statement of Undisputed Material Facts .............................................. xxxiii Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 2 of 58 iii 4818-3538-1318\4 C. To the Extent that the Term Sheet Was Binding and Not Superseded by the Settlement and Sale Agreement, the Undisputed Facts Show the Trustee Did Not Breach It. ............................................................................... xxxiv 1. Statement of Legal Elements. .............................................................. xxxiv 2. Statement of Undisputed Material Facts ................................................xxxv D. Geringer Cannot Provide Evidence Supporting Essential Elements of His Claims. ............................................................................................................ xxxvii 1. Statement of Legal Elements. ............................................................. xxxvii 2. Statement of Undisputed Material Facts ............................................. xxxvii IV. ARGUMENT .......................................................................................................................1 A. The Term Sheet Is Not A Binding Contract. ...........................................................1 1. The Term Sheet Required Bankruptcy Court Approval Before It Could Be Enforceable. .................................................................................2 2. The Term Sheet Was Subject To Express Conditions Precedent, Which Did Not Occur. .................................................................................4 B. To the Extent Bankruptcy Law and Failure of Express Conditions Did Not Render the Term Sheet Inoperative, It Was Superseded by the Settlement and Sale Agreement. ................................................................................................6 C. To the Extent that the Term Sheet Was Binding and Not Superseded by the Settlement and Sale Agreement, the Undisputed Facts Show the Trustee Did Not Breach It. .......................................................................................8 1. The Term Sheet’s Requirements. .................................................................8 2. Timely Notice Was Sent. ...........................................................................10 D. Geringer Cannot Provide Evidence Supporting Essential Elements of His Claims. ...................................................................................................................12 1. Evidence of What DSSIII Would Have Done. ..........................................13 2. Evidence of What the Bankruptcy Court Would Have Done. ...................15 3. Intervening Cause. .....................................................................................16 Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 3 of 58 iv 4818-3538-1318\4 V. CONCLUSION ..................................................................................................................18 Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 4 of 58 v D. Ray Strong (the “Trustee”), hereby submits this Motion for Summary Judgment and Memorandum in Support seeking an order granting summary judgment on all plaintiff Robert D. Geringer’s (“Geringer”) claims. I. INTRODUCTION The Complaint in this action appears to have been filed largely for tactical reasons. It was filed on the heels of (in fact, during) an attempt to mediate and settle claims the Trustee has against Geringer for his role in the gross mismanagement of, and fraud related to, the Castle Arch Real Estate Investment Company (“CAREIC”) and its affiliates. The Trustee was about to formally assert these claims by filing a complaint if the mediation failed. Geringer’s Complaint was an attempt to seize the initiative, cast himself as a plaintiff instead of a defendant, and change the venue of the fight. Geringer’s original Complaint asserted five causes of action. See Dkt. 3. At least three of these were clearly affirmative defenses to the Trustee’s claims, which Geringer was seeking to litigate as a plaintiff in California1 rather than as a defendant in Utah. Id. (declaratory judgment claims regarding statutes of limitation, release, and estoppel). When it became apparent that this tactic would likely result in the consolidation of this case into the more comprehensive Insider Case (Civil No. 2:14-cv-788TC), Geringer filed a First Amended Complaint (“FAC”), Dkt. 62, which dropped these claims, leaving only a claim for breach of contract and breach of the covenant of good faith and fair dealing. This motion seeks summary judgment on these remaining claims. 1 Geringer filed his Complaint in California. See Complaint, Dkt. 3. On the Trustee’s motion, the California court transferred the case to Utah because of its relation to the Insider Case. See Minutes, Dkt. 36. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 5 of 58 vi 4818-3538-1318\4 The breach of contract and good faith and fair dealing claims arise out of a preliminary “Memorandum of Understanding” (“MOU” or “Term Sheet”) that the parties signed shortly after a mediation session held on May 13, 2015. The problems with Geringer’s purported claims arising out of the Term Sheet are almost too numerous to catalog. • The Term Sheet was intended to be, and in fact was, superseded by and merged into a definitive Settlement and Sale Agreement that the parties executed soon after the Term Sheet. Geringer’s claims are based on a single provision of the Term Sheet, but that provision was not carried forward into the definitive Settlement and Sale Agreement. • By the parties’ express agreement, the Term Sheet was conditioned on Bankruptcy Court approval in order to be effective. The parties sought Bankruptcy Court approval for the Settlement and Sale Agreement—and were not able to obtain it. Accordingly, there never was an enforceable contract. • In any event, the undisputed facts show that, when the Term Sheet is fairly read, the Trustee fully complied with its provisions. • Finally, discovery is closed and there is no evidence to support critical elements of Geringer’s claims. Namely, there is no evidence to support the claim that any of the Trustee’s actions made any difference to the outcome at all. There is no evidence of “causation.” Rather, the facts show that the parties’ settlement was doomed for reasons contemplated by the parties, but out of their control. II. BACKGROUND A. Mediation with Geringer. Between January and May of 2015, the Trustee and Geringer engaged in a series of mediations in an attempt to resolve the Trustee’s claims against Geringer. For purposes of this motion, the last of these mediations was held on May 13, 2015. The mediation was supervised by a retired bankruptcy judge—the Honorable Randall Newsome. 1. The Smyrna Property. In prior mediation sessions, Geringer had been interested in (and the parties had explored) settlement structures under which Geringer would buy one or more pieces of real Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 6 of 58 vii 4818-3538-1318\4 estate from the Trustee at an above-market price. In exchange, the Trustee would release all claims against Geringer. Letter from S. Marsden to R. Newsome (May 6, 2015) (Apx. 72 at 14). One of the pieces of real property that Geringer had expressed interest in was a 484 acre parcel of real property located in Smyrna, Tennessee (the “Smyrna Property”). Id. At the time of the mediation, both parties knew that the Smyrna Property was already under contract to another buyer, a company called DSSIII Holding Co., LLC (“DSSIII”). SOF ¶ 12. They also knew they would have to get court approval before they could complete any agreement that involved selling real property or settling claims. See 11 U.S.C. § 363(b)(1) (requiring notice and hearing for asset sales); Fed. R. Bankr. P. 9019(a) (requiring notice and hearing for Trustee settlements); Fed. R. Bankr. P. 2002(a)(2) (requiring that creditors be provided at least 21 days’ notice of such hearings). 2. Relevant Terms of the Pre-Existing Purchase Contract with DSSIII. The Trustee had sought Bankruptcy Court approval to sell the Smyrna Property to DSSIII on November 11, 2014, i.e., 6 months before the Geringer mediation. Motion for Approval of Sale to DSSIII, Bankr. D. Utah Case No.11-35082 (“Bankr.”) Dkt. 1028 (Apx. 73 at 1). The Bankruptcy court approved the sale on December 16, 2014. Order Approving Sale to DSSIII, Bankr. Dkt. 1049 (Apx. 73 at 82). The “Real Estate Purchase and Sale Agreement” between the Trustee and DSSIII (the “DSSIII Agreement”) spanned almost 60 pages. It set forth in detail specifically negotiated terms of sale, as is customary in a commercial sale of real property. See Motion for Approval of Sale to DSSIII, Bankr. Dkt. 1028 (Apx. 73 at 21-78). Two provisions of the DSSIII Agreement are particularly relevant for purposes of the present motion. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 7 of 58 viii 4818-3538-1318\4 a) The DSSIII Agreement gave DSSIII a period of 90 days “to conduct such studies and investigations of the Property as [DSSIII] deems desirable” (the “Due Diligence Period”). DSSIII Agreement, § 5.1(a) (Apx. 73 at 28). b) It also contained a “notice and cure” provision, under which DSSIII had five (5) business days after receipt of written notice from the Trustee in which to cure any “breach of the terms or provisions of this Agreement or any of Buyer’s representations, warranties or covenants contained in this Agreement. . . .” Id. at §15.1 (Apx. 73 at 40). On March 11, 2015, the Trustee and DSSIII entered into a written amendment to the DSSIII Agreement (the “First Amendment”). On March 20, 2015, the Trustee filed a notice of the First Amendment in the Bankruptcy Court (“Notice of First Amendment”), and served all creditors. Notice of First Amendment, Bankr. Dkt. 1069 (Apx. 73 at 87). The First Amendment extended DSSIII’s Due Diligence Period through June 30, 2015, provided that DSSIII agreed to “use its good faith, diligent efforts” to pursue four specified milestones relating to DSSIII’s proposed development of the Smyrna Property: (i) “reach[ing] conceptual agreement with the Town staff on the general scope of the initial sewer infrastructure” by March 30; (ii) “reach[ing] conceptual agreement with the Town staff on the proposed cost allocation” by April 30; (iii) negotiating and procuring an “approval recommendation” from Town Staff for the form of the Sewer Agreement by May 30; and (iv) completing the public hearing process and procuring “final approval” of the Sewer Agreement by June 30. Notice of First Amendment, 5-6 (Apx. 73 at 91). The First Amendment concluded by reiterating that DSSIII’s duty was only to pursue these milestones “in good faith with commercially reasonable diligence.” Specifically, it said: Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 8 of 58 ix 4818-3538-1318\4 In the event the Buyer fails to act in good faith and with commercially reasonable diligence to pursue each of the above-referenced milestones, the Seller shall have the right, but not the obligation, to notify Buyer of the termination of the Agreement. . . . Id. at 6 (Apx. 73 at 92) Geringer received notice (directly or through counsel) of the DSSIII Agreement, the motion seeking to sell the Smryna Property to DSSII, the Bankruptcy Court’s order approving the motion, the Trustee’s Notice of First Amendment, and the First Amendment itself. See Motion for Approval of Sale to DSSIII, Bankr. Dkt. 1028 (Apx. 73 at 80); Certificate of Service of Order Approving Sale to DSSIII, Bankr. Dkt. 1050 (Apx. 75 at 51); Notice of First Amendment, 9 (Apx. 73 at 95). 3. Geringer Mediation Focuses on Smyrna Property. Despite all this, at the May 13 mediation, Geringer was intent on exploring a settlement structure that involved the Smyrna Property. Geringer’s theory was that DSSIII had failed to meet the first two milestones of the First Amendment, and that the Trustee therefore could sell the property to him. The Trustee was not convinced that Geringer was right. In fact, the week before the mediation, the Trustee’s counsel had written to the mediator to update him on “the status of the properties discussed at initial mediation session as one potential basis for settlement with Mr. Geringer.” Letter from S. Marsden to R. Newsome (May 6, 2015) (Apx. 72 at 14). In that letter, the Trustee’s counsel reported to the mediator that “there have been significant developments with respect to most of these properties negatively affecting their usefulness in connection with settlement.” Id. In particular, the Trustee’s counsel reported that since the last mediation, Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 9 of 58 x 4818-3538-1318\4 [T]he Trustee believes the buyer’s [DSSIII’s] intent to close has become more clear. The buyer appears to be diligencing the property in earnest. The buyer has spent significant sums on feasibility, engineering and other items. The buyer has requested that the due diligence period be extended to allow it to continue its efforts to clear obstacles, and has indicated it will do everything in its power to close the purchase. As a result of these developments, the Trustee no longer believes that it will be useful to explore a settlement that is premised on sale to Geringer of the Smyrna Property. Id. (emphasis added). However, the day before the mediation was to occur, DSSIII wrote to the Trustee and Trustee’s counsel to request “a call with [the Trustee] to discuss the status of the pending [Purchase Agreement].” Email from J. Tew to R. Strong and P. Hunt (May 12, 2015, 6:55am) (Apx. 72 at 82-83). Further emails from DSSIII made clear that DSSIII wanted a price reduction from the Trustee in order to close. See Email from J. Tew to P. Hunt (May 12, 2015, 6:37 pm) (Apx. 72 at 82); Email from J. Tew to P. Hunt (May 14, 2015, 5:51 am) (Apx. 72 at 81). DSSIII ultimately demanded a 33 percent reduction in the purchase price in order to close. DSSIII wanted to pay $1 million instead of the $1.5 million contracted for. Email from J. Tew to R. Strong and P. Hunt (May 16, 2015, 7:18 am) (Apx. 72 at 85). Against this backdrop, the Trustee was willing to discuss a settlement with Geringer that involved the Smyrna Property. 4. The Term Sheet with Geringer. At the mediation, the parties agreed upon the basic outline for a settlement the principal terms of which were that Geringer would buy the Smyrna Property at an above-market price. In exchange, the Trustee would release all claims against Geringer. Near the end of the day on May 13th, the parties began to commit their outline to writing in a “Memorandum of Understanding” Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 10 of 58 xi 4818-3538-1318\4 (“MOU” or “Term Sheet”). Deposition of R. Strong (“Strong Depo.”), 84-85 (Apx. 72 at 209- 210). Because of travel schedules, the parties left the mediation with this Term Sheet unfinished. Over the next week, the parties clarified a few points and on May 19th and 20th they signed the Term Sheet. Id. at 84-86, (Apx. 72 at 209-210). Both parties recognized that the Term Sheet was not the final expression of their agreement, and that it was to be superseded by a definitive agreement. At his deposition in this case, the Trustee testified as follows: Q. And is that your understanding what this document [the Term Sheet] is? A. This document is a Memorandum of Understanding. It's basically an agreement in principal, much like a term sheet. Q. And what is your understanding with regard to -- You used the term “agreement in principal”. In your mind, what does that mean? A. It would be similar to having a term sheet in any sort of transaction. You would sit down and come to some material points of an agreement, and that -- but the agreement ultimately would be defined by definitive agreements, that would ultimately be signed, that outlined all of the ins and outs and nuances of the agreement. * * * * Q. Okay. Now this -- in the first paragraph, it says it materially -- or, I'm sorry, memorializes the material points of the agreement that was reached. So there was an agreement reached at the mediation; correct? [Objection omitted]. THE WITNESS: I think -- I view this as a term sheet. I mean, a term sheet would be an agreement, but the ultimate agreement is the definitive agreement that was ultimately signed on June 30th. Strong Depo., 78-79 (Apx. 72 at 208). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 11 of 58 xii 4818-3538-1318\4 Similarly, in an affidavit Mr. Geringer filed with the Bankruptcy Court seeking approval of the ultimate Settlement and Sale Agreement between the parties, he testified that the May 20th “MOU” was superseded: At the conclusion of the second day of these mediation proceedings (on May 13, 2015), we entered into a Memorandum of Understanding (“MOU”) which MOU was executed by the parties on May 20, 2015. My attorneys at Jones Day first sent the draft Land Purchase Agreement [the definitive agreement] to counsel for the Liquidating Trustee on May 27, 2015, but the parties ultimately reduced the MOU to the Land Purchase Agreement and executed [it] on June 30, 2015. . . . The Liquidating Trustee’s and my negotiation of the Land Purchase Agreement has been at arm’s length and in good faith. . . . Declaration of R. Geringer, dated July 6, 2015 (“Geringer Declaration”), Bankr. Dkt. 1105, ¶¶ 6- 7 (Apx. 74 at 24) (emphasis added). B. The Settlement and Sale Agreement. As Geringer testified, the parties executed their final settlement agreement on June 30, 2015—forty-one days after they had signed the initial Term Sheet. Motion to Approve Settlement and Sale Agreement, Bankr. Dkt. 1103, 36-37 (Apx. 73 at 176-77). Geringer’s counsel was the principal draftsman of the document. Geringer Declaration, ¶ 6 (Apx. 74 at 24). Geringer’s counsel titled the final document “Land Purchase Agreement” presumably because his client wanted to highlight the “land purchase” aspect of the agreement, and not the fact that he was settling claims. See Land Purchase Agreement, July 22, 2013 (“Settlement and Sale Agreement”), 1, Bankr. Dkt. 1103, 23 (Apx. 73 at 163). 1. The Term Sheet Compared to the Settlement and Sale Agreement. The Settlement and Sale Agreement and the Term Sheet cover the same subject matter. They both describe a settlement between Geringer and the Trustee under which Geringer agrees Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 12 of 58 xiii 4818-3538-1318\4 to buy the Smyrna Property for $2,225,000.00 and, in exchange, the Trustee releases Geringer from all claims against him. See Settlement and Sale Agreement (Apx. 73 at 163-242) and Term Sheet (Apx. 72 at 20-22). Both documents clearly state that they are conditioned on Bankruptcy Court approval, and on the Trustee’s ability to terminate the DSSIII Agreement. Compare Term Sheet, ¶ 10 (Apx. 72 at 21) with Settlement and Sale Agreement, § 6a (Apx. 73 at 165). The Term Sheet is just over two pages long. See Term Sheet (Apx. 72 at 20-22). It lacks, among many other material provisions: (i) any legal description of the property to be sold; (ii) any provision specifying whether the Trustee was warranting or insuring title in any way; (iii) any provision securing the Trustee’s interest in the Smyrna Property during the period of Geringer’s installment payments; or (iv) any integration clause or other language indicating the Term Sheet was intended to be the final expression of the parties’ agreement. Id. The Settlement and Sale Agreement (with exhibits) is over 75 pages long. Settlement and Sale Agreement, Bankr. Dkt. 1103 (Apx. 73 at 163-242). It includes a legal description of the property, and detailed provisions that: (i) require title insurance; (ii) specify the Trustee’s security in the real property during the period of Geringer’s installment payments; (iii) specify that the Trustee is not providing any representation concerning or warranty of title; (iv) allocate risk of loss in the event the property is condemned or suffers a casualty loss; and (v) set dates for actions in the Bankruptcy Court to seek approval of the Settlement and Sale Agreement. Id. at §§1, 5, 7, 9-11 (Apx. 73 at 164-169). The Settlement and Sale Agreement also contains an integration clause: This Agreement constitutes the sole and entire agreement of the parties and is binding upon and shall inure to the benefit of Seller and Purchaser, their respective heirs, successors, and legal representatives and permitted assigns. . . . All prior discussions, negotiations and agreements are merged herein and have no Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 13 of 58 xiv 4818-3538-1318\4 further force or effect. This Agreement may not be modified or amended except by an Agreement in writing signed by Purchaser and Seller. . . . Id. at § 19(c) (Apx. 73 at 173). 2. Provisions Regarding Termination of the DSSIII Agreement. Geringer’s breach of contract claim is entirely based on a provision of the Term Sheet that was not carried forward in the Settlement and Sale Agreement. In particular, Geringer’s breach of contract claim is grounded on paragraph 7 of the Term Sheet. Section 7 states only that “[t]he Trustee will within 5 days provide notice of termination of the contract to sell the Smyrna [Property] to DSSIII and will provide notice of this sale and of the motion to approve this sale to DSSIII Holding Co., LLC.” Term Sheet, ¶ 7 (Apx. 72 at 21). Geringer contends this language tethers notice of termination to the Term Sheet, not the Settlement and Sale Agreement. See FAC ¶ 12. The Settlement and Sale Agreement contains no provision requiring the Trustee to send notice of termination to DSSIII. See Settlement and Sale Agreement (Apx. 73 at 163-242). (Nor does it have any provision attempting to preserve any claim related to performance of the Term Sheet, or for the survival of the Term Sheet.) Instead, the Settlement and Sale Agreement has an integration clause, and recites that “[o]n June 30, 2015, the [Trustee] served a Notice of Termination of Real Estate Purchase and Sale Agreement on DSSIII in accordance with its duty as a fiduciary to accept any higher and better offers for the purchase of the Property.” Settlement and Sale Agreement, 1 (Apx. 73 at 163). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 14 of 58 xv 4818-3538-1318\4 3. The Parties’ Communications Between the Term Sheet and Execution of the Settlement and Sale Agreement. When the parties signed the Term Sheet, they expected that they would be able to quickly negotiate and execute the Settlement and Sale Agreement. On May 20, 2015, the day the Term Sheet was signed, the Trustee’s counsel emailed Geringer’s counsel saying that the parties should try to “exchange drafts of moving papers and sales papers on Friday”—i.e., on May 22nd, just two days later. Email from S. Marsden to R. Wynne (May 20, 2015, 9:51 am) (Apx. 72 at 19) (emphasis added). Geringer’s counsel agreed, saying, “That should work.” Email from R. Wynne to S. Marsden (May 20, 2015, 10:24 am) (Apx. 72 at 18). The Parties Clarify Section 7 of the Term Sheet. (a) On May 20th, the Trustee’s counsel also wrote to confirm that notice of termination would go to DSSIII within five days after the parties had actually executed the final Settlement and Sale Agreement: We’re working on a written notice of termination to the current buyer and a potential ambiguity came up. We’re intending to send it within five days of the time we sign the sales agreement. Is that what you understood? Is that ok? Email from S. Marsden to R. Wynne (May 20, 2015, 11:35 am) (Apx. 72 at 18) (emphasis added). Geringer’s counsel responded almost immediately, confirming the Trustee’s understanding: That’s fine, the sooner the better I would think. I’m on a conference call, will call you later to understand this ambiguity. Email from R. Wynne to S. Marsden (May 20, 2015, 11:38 am) (Apx. 72 at 18) (emphasis added). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 15 of 58 xvi 4818-3538-1318\4 From then until the evening of June 25th, the parties operated on the understanding that a notice would go to DSSIII within five days after the parties executed the final Settlement and Sale Agreement. For example, on May 27th, the Trustee’s counsel wrote to Geringer’s counsel saying “I need to know the eta on getting the purchase agreement. We need to get this done asap so that we can terminate with the current proposed buyer.” Email from P. Hunt to R. Wynne (May 27, 2015, 12:00 pm) (Apx. 72 at 24) (emphasis added). Geringer’s counsel responded, “We should get [it] to you within a half hour or so[,] the Purchase and Sale agreement,” and then said “Can you send us a draft copy of the notice of termination so we can see it, when do you plan on giving it to the buyer?” Email from R. Wynne to P. Hunt (May 27, 2015, 1:36) (Apx. 72 at 24) (emphasis added). Delays in Preparing the Settlement and Sale Agreement. (b) At this time, the parties were planning to sign a final agreement and present it to the Bankruptcy Court for approval by the middle of June. See Email from P. Hunt to S. Marsden; R. Wynne; G. Hofmann; and S. Goldberg (May 26, 2015, 6:13 pm) (Apx. 72 at 25-26). The Trustee’s counsel had called the Bankruptcy Court’s scheduling clerk and obtained a hearing date for the motion on June 18, 2015. To have a hearing on that date, the parties had to file their papers with the Bankruptcy Court no later than May 28, 2015. See Fed. R. Bankr. P. 2002(a)(2). Unfortunately, for a variety of reasons the process of completing the Settlement and Sale Agreement and the related papers necessary to seek court approval quickly bogged down. (i) Geringer Insists on Preparing the First Draft of the Settlement and Sale Agreement. The first cause for delay was that Geringer insisted on preparing the first draft of the Settlement and Sale Agreement himself, rather than having his counsel do it. As a result, May Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 16 of 58 xvii 4818-3538-1318\4 22nd—the parties’ original deadline for exchanging drafts of the Settlement and Sale Agreement and related documents—came and went without the Geringer side providing any draft documents. That day, Geringer’s counsel responded to an email from the Trustee’s counsel saying, “Robert [Geringer] is still working on the purchase and sale agreement, and all the exhibits, deed of trust etc., and then I need to layer in some things I’m sure, so we won’t get it to you today, it will be either over the holiday weekend or Tuesday.” See Email from R. Wynne to S. Marsden (May 22, 2015, 3:07 pm) (Apx. 72 at 26) (emphasis added). On Tuesday (May 26th), the Trustee’s counsel circulated a draft of the documents the Trustee was responsible for (the sale motion), but the Geringer side still did not circulate any draft documents that day. See Email from P. Hunt to S. Marsden; R. Wynne; G. Hofmann; S. Goldberg; J. Adams (May 26, 2015, 6:13 pm) (Apx. 72 at 25-26). (ii) Geringer Next Insists On “Bidding Protections.” On Wednesday, May 27th, the day before the deadline to submit papers for a hearing on June 18th, Geringer introduced a new demand: that the parties needed to create a set of “bidding protections” and submit them for court approval. Email from P. Hunt to R. Wynne (May 27, 2015, 12:00 pm) (Apx. 72 at 24). The Term Sheet made no mention of bidding protections. Geringer’s insistence that bid procedures be drafted, agreed upon, and presented for Bankruptcy Court approval required an additional week, and caused further delay. Email from P. Hunt to L. Sinanyan (May 31, 2015, 9:25 pm) (Apx. 72 at 60-61); Email from P. Hunt to R. Wynne and L. Sinanyan (June 1, 2015, 3:39 pm) (Apx. 72 at 60). As a result, the June 18th hearing date became impossible. The Trustee’s counsel promptly called the Bankruptcy Court’s scheduling clerk and obtained the next available hearing Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 17 of 58 xviii 4818-3538-1318\4 date, July 13, 2015 at 2:00. Email from P. Hunt to R. Wynne and L. Sinanyan (June 1, 2015, 3:39 pm) (Apx. 72 at 60). (iii) Geringer’s Counsel Becomes Involved with Another Matter. Then, Geringer’s counsel apparently became involved in a matter for a different client, and this consumed their time from early June through June 19th. On June 3rd, the Trustee’s counsel wrote to ask Geringer’s counsel for the bidding procedures papers. Email from P. Hunt to L. Sinanyan (June 3, 2015, 9:40 pm) (Apx. 72 at 29). Geringer’s counsel responded, saying that they had “been consumed for the past week with an emergency filing” but that they could “turn [their] attention to finalize the bidding procedure papers 2nd half of tomorrow or this weekend.” Email from L. Sinanyan to P. Hunt (June 4, 2015, 11:26 am) (Apx. 72 at 29). But after June 4th, the Trustee’s counsel received no communications from Geringer’s counsel at all until Friday, June 19th. On June 19th, Geringer’s counsel finally wrote, saying: I know I haven't sent over the Bid Procedures Motion/Bid Procedures and Sale Order, but I also would request your current markup of the Land Purchase Agreement, the Sale Motion and the Notice of Termination. Email from L. Sinanyan to P. Hunt (June 19, 2015, 12:22 pm) (Apx. 72 at 59). Despite the fact that the Geringer side had been entirely silent for two weeks, Geringer said that they would “like to keep the July 13th hearing date which would require us to file everything on Monday.” Id. (emphasis added). The Trustee’s counsel promptly told Geringer’s counsel that they already had “the most recent version of the sale motion.” Email from P. Hunt to L. Sinanyan (June 19, 2015, 2:05 pm) (Apx. 72 at 59). The Trustee provided the other documents to Geringer’s counsel before the end Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 18 of 58 xix 4818-3538-1318\4 of the day. Emails from P. Hunt to R. Wynne (June 19, 2015, 5:38 and 6:05 pm) (Apx. 72 at 32- 54). Late Saturday afternoon, Geringer’s counsel emailed to say that they had changed their mind about a July 13 hearing and that now they would “like to schedule the hearing on [July] 20th and file by a week from this Monday [i.e., June 22].” Email from L. Sinanyan to P. Hunt (June 20, 2015, 5:52 pm) (Apx. 72 at 57). Geringer’s counsel said this additional delay would allow Geringer’s counsel to “turn [the documents] Monday and also send you the draft sale order.” The parties would then have the week of June 22 through June 26 to “finalize” the documents. Id. On Monday, June 22nd, Geringer’s counsel wrote reiterating that the hearing before the Bankruptcy Court would have to be delayed, and saying “But I would like to get the notice of termination out this week along with the motions. . . .” Email from R. Wynne to P. Hunt (June 22, 2015, 8:23 am) (Apx. 72 at 56) (emphasis added). At that time, all of the papers (including the draft notice of termination) were in Geringer’s counsel’s hands awaiting revisions. Email from P. Hunt to L. Sinanyan (June 25, 2015, 8:26 pm) (Apx. 72 at 64). Contrary to Geringer’s counsel’s promise to turn the documents on Monday, Geringer’s counsel did not, in fact, provide revised drafts of the main documents (other than the Termination Notice), until the following Friday afternoon (June 26, 2015). Email from L. Sinanyan to S. Marsden (June 26, 2015, 2:13pm) (Apx. 72 at 73). Geringer’s Counsel First Asserts that Notice of Termination is (c) Required within Five Days of the Term Sheet. The substance and tone of Geringer’s counsel’s communications changed markedly the night of Thursday June 25th. At this point, all the relevant documents had been in Geringer’s counsel’s hands for a week. On the afternoon of June 25th, Geringer’s counsel wrote to ask if Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 19 of 58 xx 4818-3538-1318\4 the Trustee could be available for a hearing on July 21st. Email from L. Sinanyan to P. Hunt (June 25, 2015, 1:54 pm) (Apx. 72 at 64). The Trustee’s counsel responded “I believe I let you know last week that this date would work for me,” and further “I believe we have all documents back to you on our end, but we have not yet seen your client’s comments on the most recent version of the settlement agreement.” Email from P. Hunt to L. Sinanyan (June 25, 2015, 8:26 pm) (Apx. 72 at 64) (emphasis added). Geringer’s counsel responded in an email at 9:15 pm. In this email Geringer claimed, for the first time, that the Notice of Termination was required within 5 days of the Term Sheet: We are diligently working on finalizing the draft documents on our side, including providing copies of the Promissory Note, deed of trust and proposed Sale Order for your review, and what we believe should be final turns of the Bid Procedures Motion, Sale motion and Land Purchase Agreement. We expect to have all or most of this to you tomorrow. We remain concerned that, in the meantime, you do not hold up sending the Termination Letter to DSSIII. Per our Memorandum of Understanding (MOU), the Trustee had to provide the Termination Letter to DSSIII within 5 days of execution of the MOU which would have been May 25. You first sent us the Termination Letter on June 19 after close of business, insisting on coupling the sending of the Termination Letter to DSSIII with execution of documents by my client, which is something that is not provided for in the MOU. We attach our proposed minor comments to the Termination Letter and request that the Termination Letter be sent out before noon tomorrow. We will also provide in the markup of the Land Purchase Agreement. . . . Email from L. Sinanyan to P. Hunt (June 25, 2015, 9:15 pm) (Apx. 72 at 68). Surprised by the dramatic shift in Geringer’s position regarding the Notice of Termination, the Trustee’s counsel immediately responded: Lori – Thanks for the drafts. Peggy is taking the laboring oar on putting these documents. She is traveling and completely out of touch until at least noon tomorrow. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 20 of 58 xxi 4818-3538-1318\4 I do want to quickly respond to two points though. First, I’m out of town from July 17th through the 27th, and it is likely I’ll have the principal responsibility for the hearing so, at present, it does not look like the 21st will work. However, the 28th should work. Second, I think you are wrong about the deadline for us to send the termination letter. It’s 5 days from the time we sign the definitive documents, not from the signing of the MOU. I was worried about this ambiguity in the MOU and corresponded with Rick about it some time ago. We didn’t (and don’t) want to give notice of termination before we have a definitive set of documents with Mr. Geringer. Email from S. Marsden to L. Sinanyan (June 25, 2015, 9:09 pm) (Apx. 72 at 67) (emphasis added). The afternoon of June 26th (Friday) Geringer’s counsel finally provided marked up drafts of the Settlement and Sale Agreement, the Sale Motion, and the Bidding Procedures Motion. In the accompanying email, Geringer’s counsel asked to have a conversation about getting the Notice of Termination out “today,” and reiterated the position it had taken the night before: “[t]he MOU does not tie sending out the Termination Notice to any signing of documents and time is of the essence in getting out the Termination Notice.” Email from L. Sinanyan to S. Marsden (June 26, 2015, 2:13 pm) (Apx. 72 at 73-74). The Trustee’s counsel was in depositions on Friday and the parties were unable to talk. Email from S. Marsden to L. Sinanyan (June 26, 2015, 12:58pm) (Apx. 72 at 67). On Saturday night, Geringer’s counsel asked that the parties have a call on Sunday. Email from L. Sinanyan to S. Marsden (June 27, 2015, 11:13 pm) (Apx. 72 at 71). Early Sunday morning, the Trustee’s counsel responded: Lori – I’m in the office today, working on a brief in another matter. I’m happy to talk at any time. Call me at 801-933-8944. Email from S. Marsden to L. Sinanyan (June 28, 2015, 9:38 am) (Apx. 72 at 71). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 21 of 58 xxii 4818-3538-1318\4 Despite Geringer’s counsel’s request for a call, Geringer’s counsel did not call on Sunday. Declaration of S. Marsden (Apx. 75 at 204). Geringer’s counsel apparently had a medical emergency sometime the weekend of June 27th. In addition to the missed phone call on Sunday, on Monday, June 29th, the Trustee’s counsel unsuccessfully telephoned Geringer’s counsel to work out final issues. Late Monday night, Geringer’s counsel emailed the Trustee’s counsel to say “Peggy, I’m sorry I didn’t call today. Actually ended up in the ER. [N]ame your time tomorrow for a call to finalize.” Email from L. Sinanyan to P. Hunt (June 29, 2015, 10:05 pm) (Apx. 72 at 79). On June 30, 2015, the parties executed the Settlement and Sale Agreement, and that same day the Trustee sent notice of termination to DSSIII. Bankr. Dkt 1103; Bankr. Dkt. 1104, Ex. 1 (Apx. 73 at 176, Apx. 74 at 15). 4. The Trustee’s Communications with DSSIII. The day before the Trustee was to attend mediation with Geringer, DSSIII’s counsel wrote initiating a discussion seeking a price reduction on the Smyrna Property. See supra p. x. On May 27, 2015—one week after the Trustee signed the Term Sheet with Geringer— DSSIII’s counsel demanded “formal resolution” of the price reduction issue. Email from J. Tew to R. Strong and P. Hunt (May 27, 2015, 12:07 pm) (Apx. 72 at 88). On Friday, May 29th, the Trustee’s counsel wrote a brief email responding to DSSIII’s demand, and terminating the DSSIII Agreement. The Trustee’s counsel’s email said, Joel and group, Based on the conversations that we had and our analysis since, the Trustee does not think it is in our mutual best interests to continue to pursue this transaction. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 22 of 58 xxiii 4818-3538-1318\4 Email from P. Hunt to J. Tew (May 29, 2015, 7:23 pm) (Apx. 72 at 87). DSSIII’s response came early Saturday morning: “We certainly do not agree to any termination of the existing PSA at this point in time; instead, we need to mutually discuss how to consummate a transaction that works for both parties.” Email from J. Tew to P. Hunt (May 30, 2015, 6:10 am) (Apx. 72 at 87) (emphasis added). On Tuesday, June 2, there was a telephonic conference between DSSIII’s counsel and the Trustee’s counsel. In that call, the Trustee’s counsel told DSSIII that (i) the Trustee was unwilling to renegotiate price, (ii) the Trustee had another buyer for the property, and (iii) the Trustee had become reasonably insecure about DSSIII’s ability to perform, and was terminating the contract. Supplemental Declaration of R. Strong, Bankr. Dkt. 1135, 13-14 (Apx. 74 at 65- 66). From the time the issue was first raised, DSSIII consistently resisted any attempt to terminate the DSSIII Agreement. a) On June 3rd, DSSIII sent the Trustee a copy of a formal Development Agreement it said was “pending with the Town of Smyrna, for the sewer, annexation and rezoning matters,” and stating that “[i]n the meantime, Drapac certainly intends to keep the pending PSA in force and to proceed in good faith and with due diligence to complete the pending matters with the Town of Smyrna, as contemplated by the PSA.” Email from J. Tew to P. Hunt (June 3, 2015, 6:00 am) (Apx. 72 at 91). b) On June 4th, DSSIII told the Trustee “Drapac Group is 100% committed to completing its Development Agreement approval process with the Town of Smyrna before June 30, and has been assured by the Town Attorney that a special meeting is being advertised and noticed pursuant to TN law to do so. We have agreed on the substance of the DA. Drapac also will be prepared by its June 30 PSA deadline to make its final due diligence decision, per the contract, as it will have the DA approved by then. Thus, Drapac is performing and will continue to perform in compliance with our PSA.” Email from J. Tew to P. Hunt (June 4, 2015, 12:28 pm) (Apx. 72 at 100). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 23 of 58 xxiv 4818-3538-1318\4 c) On June 19th, DSSIII told the Trustee that the Town of Smyrna had “held a special meeting and approved the [Development Agreement] this past week.” Email from J. Tew to P. Hunt (June 19, 2015, 11:12 pm) (Apx. 72 at 102). d) On June 24th, DSSIII’s counsel forwarded an executed Development Agreement between the Town of Smyrna and DSSIII. Email from J. Tew to R. Strong (June 24, 2015, 12:57 pm) (Apx. 72 at 123). e) Early on June 29th, DSSIII wrote to the Trustee saying that DSSIII had “completed its feasibility review” and had “elected to proceed with the PSA in accordance with its terms.” Email from J. Tew to P. Hunt (June 29, 2015, 7:54 am) (Apx. 72 at 142). On June 30, 2015, the Trustee sent DSSIII another “Notice of Termination.” Letter from P. Hunt to T. Reilly (June 30, 2015) (Apx. 72 at 145-46). It stated that the Trustee was terminating the contract with DSSIII because, among other things, “on or about May 12, 2015 and thereafter, DSSIII indicated that it would require material changes and concessions to the Purchase Agreement including yet further extensions of its Due Diligence Period,” and that “[i]n addition, DSSIII has not met many of the milestones under the Amendment,” and that “[i]n the meantime, the Seller has received an offer that Seller believes materially higher and better, both in amount and other terms. The Trustee’s duties require that he proceed with the higher and better offer.” Id. DSSIII’s response to this notice was consistent with its response to the May 29th notice. DSSIII said that there were several reasons that the DSSIII Agreement had not been, and could not be, properly terminated: a) The “Diligence Period” expired at 5 pm Eastern Time on June 30, 2015, and that the termination notice was not time/date stamped until 6:44 pm Eastern Time on June 30th. Letter from J. Tew to R. Strong and P. Hunt (July 1, 2015), 2 (Apx. 72 at 150) b) The Trustee’s contention that DSSIII had not performed under the PSA was “patently false.” Id. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 24 of 58 xxv 4818-3538-1318\4 c) “[T]he Buyer’s obligation under the [PSA] was ‘to use its good faith, diligent efforts to pursue’ the referenced milestones related to the Sewer Agreement”—it did not require that they be achieved. Id. at 2-3 (Apx. 72 at 150-51). d) “[T]he Seller never provided the required notice of default under Section 15.1 of the PSA, and the required five (5) business days to cure such alleged default.” Id. at 3 (Apx. 72 at 151). On July 14, 2015, the Trustee sent DSSIII yet another Notice of Termination. This notice was based upon the claim that DSSIII had not satisfied the “Financing Contingency” in the DSSIII Agreement. Letter from P. Hunt to T. Reilly, July 14, 2015 (Apx. 72 at 154-55). 5. Proceedings Before the Bankruptcy Court. On July 6, 2015, the Trustee filed his “Motion Seeking (1) Approval Of Sale Of Property, Including And Relating To Real Property Located In Rutherford County, Tennessee, To Robert Geringer Out Of The Ordinary Course Of Business, Free And Clear Of Liens, Claims, Encumbrances And Interests, And Subject To Higher And Better Offers, Pursuant To 11 U.S.C. § 363(b) And (f) And Federal Rules Of Bankruptcy Procedure 2002 And 6004; (2) Authorization To Pay Fee To Real Estate Broker; (3) Authorization To Pay Taxes And Ordinary Sale Costs; And (4) Related Relief” (the “Sale Motion”). Bankr. Dkt. 1103 (Apx. 73 at 141-269). A Notice of Hearing setting the Sale Motion for hearing on July 28, 2015. Bankr. Dkt. 1106 (Apx. 75 at 134-140). DSSIII opposed the Sale Motion. First, on July 10, 2015, DSSIII filed a Complaint against the Trustee in the U.S. District Court for the Middle District of Tennessee (the “DSSIII Complaint”). DSSIII v. Strong, Case No. 3:15-cv-00761 (M.D. Tenn. 2015), Dkt. 1 (Apx. 75 at 53-133). The DSSIII Complaint alleged that the Trustee’s attempted sale to Geringer was a breach of the Trustee’s contract with DSSIII. In the Complaint, DSSIII repeated its claim (i) that Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 25 of 58 xxvi 4818-3538-1318\4 DSSIII was not in breach because “the Amended Agreement did not require [DSSIII] to accomplish the ‘milestones’ by the specified dates, but required [DSSIII] to ‘use its good faith, diligent efforts to pursue the [] milestones,’” DSSIII Complaint, ¶ 32 (Apx. 75 at 59); (ii) that since the execution of the DSSIII Agreement it had “expended substantial time and expenses in diligently pursuing, negotiating and procuring an agreement . . . to provide water services to the Property,” id. at ¶ 26 (Apx. 75 at 87); and (iii) in any event the DSSIII Agreement “required Sellers to give Buyer notice and opportunity to cure any alleged default,” id. at ¶ 21 (Apx. 75 at 56), and no such opportunity to cure had been given. The Complaint asked the court for a “judgment against Sellers for specific performance of the Agreement.” Id. at ¶ 54 (Apx. 75 at 63). On July 12, 2015, DSSIII filed an “Emergency Request” in Bankruptcy Court asking for a status conference before any hearing could be held on the Trustee’s Sale Motion. DSSIII Emergency Request, Bankr. Dkt. 1113 (Apx. 74 at 28-33). In its papers, DSSIII said that the Trustee was “attempting to sell valuable real property, which is under contract to DSSIII, to another party,” and that DSSIII “remains ready, willing and able to close immediately. . . but is being prevented from doing so by the trustee.” Id. at ¶ 2 (Apx. 74 at 29). DSSIII objected to the Trustee’s attempted sale to Geringer on four grounds: (i) bidding for the Smyrna Property closed when the Bankruptcy Court approved the sale to DSSIII, so the Trustee could not entertain an offer from Geringer; (ii) DSSIII holds equitable title and so no sale could take place until the Tennessee Action was resolved; (iii) the sale to Geringer could not be at arms’ length or in good faith because it was entered while the Property was under contract to DSSIII, and while DSSIII was expending substantial time and significant funds preparing to close; and (iv) the Trustee’s Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 26 of 58 xxvii 4818-3538-1318\4 motion was improperly brought under 11 U.S.C. § 363, when it needed to be noticed and evaluated under Bankruptcy Rule 9019 since it “clearly seeks to implement a global compromise and settlement between the Trustee and Geringer of a variety of disputes and claims.” Id. at ¶ 20 (Apx. 74 at 31-32). The following day (July 13th) DSSIII submitted an affidavit to the Bankruptcy Court from Tyson Reilly, its “Property Director,” setting forth DSSIII’s efforts to comply with the DSSIII Agreement. Affidavit of T. Reilly, Bankr. Dkt. 1123 (Apx. 74 at 34-45). Mr. Reilly testified among other things, that DSSIII: (i) had engaged in “more than six (6) months of continuous, good faith, diligent efforts”; (ii) that it had entered contracts to purchase three additional tracts adjacent to the Property, in order to spread development costs and make the project more feasible; and (iii) that it had “incurred substantial due diligence and contract expenses in addition to the funds expended on acquisition of the other tracts of land. . . .” Id. at ¶ 15 (Apx. 74 at 39-41). The next day Jeff Austin, Keith Green, and William Grundy filed a separate joint objection to the Trustee’s motions. Joint Objection, Bankr. Dkt. 1125 (Apx. 74 at 46-52). They objected that although the Settlement and Sale Agreement was noticed as a sale of real property under 11 U.S.C. § 363, it was really a settlement agreement with Geringer. As such, the Trustee needed to establish that the settlement was justified under Federal Rule of Bankruptcy Procedure 9019, and the motion did not attempt to do so. Id. at 2 (Apx. 74 at 47). On July 14th, the Bankruptcy Court held a hearing on DSSIII’s emergency request. At the hearing the Bankruptcy Court continued any hearings on the Trustee’s motion to sell the Smyrna Property, without date, effectively denying the Sale Motion. July 14 Hr’g Trans., Bankr. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 27 of 58 xxviii 4818-3538-1318\4 Dkt. 1338 (Apx. 72 at 156-87). The Court explained that the reasons for its order were: (i) that the Trustee had entered a contract with DSSIII and “[n]obody, not this Court nor the district court for the Middle District of Tennessee, has made a determination on whether the contract’s been terminated between now and July 30th [sic]”; (ii) “a direct challenge to the trustee’s position [that DSSIII’s contract had been terminated is] pending in a federal district court in front of an Article 3 judge who has jurisdiction over the matter”; and (iii) “I think parties such as Drapac have a right to rely on orders of this Court approving contracts between fiduciaries that appear before this Court, and I am not going to allow the trustee on the state of the record to sell the property to somebody else when the buyer indicates that it is ready, willing, and able to perform according to the contract that it signed and that I approved.” July 14 Hr’g Trans., 25- 27 (Apx. 72 at 180-82) (emphasis added). On July 23, 2015 the Trustee asked the Bankruptcy Court to reconsider its decision not to entertain the Sale Motion. Motion to Reconsider, Bankr. Dkt. 1137 (Apx. 74 at 174-186). The Trustee argued that the Bankruptcy Court retained jurisdiction over the Smyrna Property and should hold an evidentiary hearing to consider whether DSSIII had breached or anticipatorily breached its contract with the Trustee. Id. at 6-9 (Apx. 74 at 179-182). Geringer joined in the Trustee’s motion and filed his own brief emphasizing the evidence showing that DSSIII had anticipatorily breached his contract with the Trustee. Geringer Joinder to Motion to Reconsider, Bankr. Dkt. 1139 (Apx. 74 at 226-235). The Bankruptcy Court held a hearing on the Trustee’s Motion to Reconsider on July 28, 2015, and denied the motion. Order Denying Motion to Reconsider, Bankr. Dkt. 1148 (Apx. 75 at 1-2). At the hearing, the court said that Geringer’s and the Trustee’s “legal argument, or the Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 28 of 58 xxix 4818-3538-1318\4 supplemental declarations, factual averments [did not] change much from two weeks ago.” July 28 Hr’g Trans., 33 (Apx. 74 at 219). The court further said it still believed the “milestones” in the DSSIII Agreement “were matters of best efforts, good faith, and commercially reasonable diligence rather than drop-dead, hard and fast obligations,” Id. at 34-35 (Apx. 74 at 220-221). The court also said that “anticipatory repudiation” requires “a total and unqualified refusal to perform the contract, an indication that more negotiations are sought is not a total or unqualified refusal to perform.” Id. at 36 (Apx. 74 at 222). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 29 of 58 xxx 4818-3538-1318\4 III. STATEMENT OF ELEMENTS AND UNDISPUTED MATERIAL FACTS2 A. The Term Sheet Is Not a Binding Contract. 1. Statement of Legal Elements. The Term Sheet Required Bankruptcy Court Approval Before (a) It Could Be Enforceable. Under Bankruptcy Rule 9019, a settlement agreement with a Trustee is not enforceable until approved by the Bankruptcy Court. See In re Blehm Land & Cattle Co., 859 F.2d 137, 141 (10th Cir. 1988); Ritchie Capital Mgmt., L.L.C. v. Kelley, 785 F.3d 273, 279 (8th Cir. 2015); Reynolds v. Comm’r, 861 F.2d 469, 473 (6th Cir. 1988); In re Leslie Fay Cos., 168 B.R. 294, 305 (Bankr. S.D.N.Y. 1994). Similarly, under 11 U.S.C. § 363(b)(1), a trustee’s agreement to sell assets is not enforceable prior to bankruptcy court approval. Horse Haven, Inc. v. Stephens, 1990 U.S. App. LEXIS 27033, at *3 (4th Cir. June 19, 1990) (unpublished); In re SpecialtyChem Prods. Corp., 372 B.R. 434, 438-39 (E.D. Wis. 2007); see also In re Broadmoor Place Invs., L.P., 994 F.2d 744, 745 n.1 (10th Cir. 1993); In re Asia Global Crossing, Ltd., 326 B.R. 240, 256 (S.D.N.Y. 2005). The Term Sheet Was Subject to Express Conditions Precedent, (b) Which Did Not Occur. Under applicable law, “the parties to [a] contract have no duty to perform until the condition is fulfilled, so the failure of a condition relieves the parties of all of their contractual duties.” Mind & Motion Utah Investments, LLC v. Celtic Bank Corp., 2016 UT 6, ¶ 20, 367 P.3d 994, 1000 (emphasis added); see also McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 12 ¶ 29, 274 P.3d 981, 987-88 (“no duties arise between the contracting parties until the condition has been fulfilled”) (emphasis added). 2 Paragraphs of the Statement of Elements and Undisputed Facts are cited as “SOF ¶ __.” Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 30 of 58 xxxi 4818-3538-1318\4 2. Statement of Undisputed Material Facts. 1. The Term Sheet was subject to the express conditions that: (i) it be approved by the Bankruptcy Court; and (ii) the Trustee be able to terminate the DSSIII Agreement, which had previously been approved by the Bankruptcy Court. Term Sheet, ¶ 10 (Apx. 72 at 21). 2. On July 6, 2015, the Trustee filed the Sale Motion. See Sale Motion, Bankr. Dkt. 1103 (Apx. 73 at 141-269). The Sale Motion sought court approval to sell the Smryna Property to Geringer pursuant to 11. U.S.C. 363 and asked the court to find that the DSSIII Agreement had been terminated. Id. at ¶¶ 25-26 (Apx. 73 at 150-51). Hearing on the Sale Motion was originally set for hearing July 28, 2015. Notice of Hearing on Sale Motion, Bankr. Dkt. 1106 (Apx. 75 at 134). 3. In the confirmed Plan of Liquidation for the Consolidated Legacy Debtor, the Bankruptcy Court specifically retained jurisdiction to approve compromises and settlements involving the Legacy Debtor Liquidating Trusts, pursuant to Bankruptcy Rule 9019. See Second Amended Chapter 11 Trustee’s Plan of Liquidation, Dated February 25, 2013 (“Confirmed Plan”), 49, Bankr. Dkt. 701 (Apx. 75 at 193). 4. The Bankruptcy Court never approved the Sale Motion. The Bankruptcy Court did not allow the Trustee to terminate the DSSIII Agreement. In particular, a) On July 12, 2015, DSSIII filed an “Emergency Request” in the Bankruptcy Court asking for a “status conference” before any hearing could be held on the Trustee’s Sale Motion. DSSIII Emergency Request, Bankr. Dkt. 1113 (Apx. 74 at 28-33). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 31 of 58 xxxii 4818-3538-1318\4 b) On July 14, 2015, Jeff Austin, Keith Green, and William Grundy filed a separate joint objection to the Trustee’s Sale Motion. Joint Objection, Bankr. Dkt. 1125 (Apx. 74 at 46-52). The Joint Objection objected to the Settlement and Sale Agreement on the ground that the Settlement and Sale Agreement was noticed as a sale of real property under 11 U.S.C. § 363, when it was really a settlement agreement with Geringer, which required that the Trustee establish that the settlement was justified under Federal Rule of Bankruptcy Procedure 9019, and the motion did not attempt to do so. Id. c) On July 14th, the Bankruptcy Court held a hearing on DSSIII’s Emergency Request. At the hearing the Bankruptcy Court ordered that any hearing on the Trustee’s Sale Motion be continued, without date, effectively denying the motion. July 14 Hr’g Trans., Bankr. Dkt. 1338, 30 (Apx. 72 at 185). d) On July 23, 2015 the Trustee asked the Bankruptcy Court to reconsider its decision not to entertain the Sale Motion. Motion to Reconsider, Bankr. Dkt. 1137 (Apx. 74 at 174-186). e) The Bankruptcy Court held a hearing on the Trustee’s Motion to Reconsider on July 28, 2015. The court denied the motion. Order Denying Motion to Reconsider, Bankr. Dkt. 1148 (Apx. 75 at 1-2). B. To the Extent Bankruptcy Law and Failure of Express Conditions Did Not Render the Term Sheet Inoperative, It Was Superseded by the Settlement and Sale Agreement. 1. Statement of Legal Elements. A fully integrated agreement supersedes a prior agreement dealing with the same subject matter, precluding a claim for breach of the prior agreement. Novell, Inc. v. Canopy Grp., Inc., Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 32 of 58 xxxiii 4818-3538-1318\4 2004 UT App 162 ¶ 14, 92 P.3d 768, 772; Ringwood v. Foreign Auto Works, Inc., 671 P.2d 182, 183 n. 2 (Utah 1983). 2. Statement of Undisputed Material Facts. 5. The parties executed the Term Sheet on or about May 20, 2015. See Term Sheet, 3 (Apx. 72 at 22); FAC ¶ 9; Strong Depo., 84-85 (Apx. 72 at 209-10). 6. The Term Sheet was not the final expression of the parties’ agreement. Strong Depo., 79-80 (Apx. 72 at 208); Geringer Declaration, Bankr. Dkt. 1105, ¶ 6 (Apx. 74 at 24). 7. The Term Sheet did not contain an “integration clause.” See Term Sheet (Apx. 72 at 20-22). 8. The parties executed the Sale and Settlement Agreement on June 30, 2015—some forty-one days after they had signed the initial Term Sheet. See Settlement and Sale Agreement, 36-37 (Apx. 73 at 176-77). 9. The Settlement and Sale Agreement and the Term Sheet cover the same subject matter. They both describe a settlement between Geringer and the Trustee under which Geringer agrees to buy the Smyrna Property for $2,225,000.00 and, in exchange, the Trustee releases Geringer from all claims against him. Compare Term Sheet (Apx. 72 at 20-22) with Settlement and Sale Agreement (Apx. 73 at 163-242). 10. The Settlement and Sale Agreement also contains an integration clause: This Agreement constitutes the sole and entire agreement of the parties and is binding upon and shall inure to the benefit of Seller and Purchaser, their respective heirs, successors, and legal representatives and permitted assigns. . . . All prior discussions, negotiations and agreements are merged herein and have no further force or effect. This Agreement may not be modified or amended except by an Agreement in writing signed by Purchaser and Seller. . . . Settlement and Sale Agreement, § 19(c) (Apx. 73 at 173). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 33 of 58 xxxiv 4818-3538-1318\4 11. The Settlement and Sale Agreement addressed providing DSSIII notice of termination, stating that “[o]n June 30, 2015, the [Trustee] served a Notice of Termination of Real Estate Purchase and Sale Agreement on DSSIII in accordance with its duty as a fiduciary to accept any higher and better offers for the purchase of the Property.” Settlement and Sale Agreement, 1 (Apx. 73 at 163). C. To the Extent that the Term Sheet Was Binding and Not Superseded by the Settlement and Sale Agreement, the Undisputed Facts Show the Trustee Did Not Breach It. 1. Statement of Legal Elements. In Utah, a court should confine itself to the four corners of a contract and ignore extrinsic evidence only where the court first determines that the contract is integrated, and that its terms are unambiguous. See Tangren Family Trust v. Tangren, 2008 UT 20, ¶ 11, 182 P.3d 326, 330; Daines v. Vincent, 2008 UT 51, ¶¶ 22, 27, 190 P.3d 1269, 1275-77; Café Rio, Inc., v. Larkin- Gifford-Overton, LLC, 2009 UT 27, ¶ 25, 207 P.3d 1235, 1240. Where these two conditions are not met, it is error to fail to consider otherwise relevant and persuasive evidence. See Tangren, 2008 UT 20, ¶ 11, 182 P.3d 326, 330; Deep Creek Ranch, LLC v. Utah State Armory Bd., 2008 UT 3, ¶¶ 15, 16, 178 P.3d 886, 890; Colonial Leasing Co. of New England, Inc. v. Larsen Bros. Constr. Co., 731 P.2d 483, 486-87 (Utah 1986). The general rule with respect to compliance with contract terms is not one of strict compliance, but of substantial compliance. Pursuant to the doctrine of substantial compliance, a technical breach of the terms of the contract is excused because the actual performance is so similar to the required performance that any breach that may have been committed is immaterial. 15 Williston on Contracts, § 44:52 (4th ed. 2000); Cent. Utah Water Conservancy Dist. v. Upper Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 34 of 58 xxxv 4818-3538-1318\4 East Union Irrigation Co., 2013 UT 67, ¶ 25 n.2, 321 P.3d 1113, 1120; Pack 2000 Inc., v. Cushman, 89 A.3d 869, 878 (Conn. 2014). 2. Statement of Undisputed Material Facts. 12. Paragraph 7 of the Term Sheet states that: The Trustee will within 5 days provide notice of termination of the contract to sell the Smyrna to DSSIII and will provide notice of this sale and of the motion to approve this sale to DSSIII Holding Co., LLC. (Apx. 72 at 21). 13. The Term Sheet did not contain an “integration clause.” See Term Sheet (Apx. 72 at 20-22). 14. The Trustee’s intent and understanding of Section 7 of the Term Sheet was that it required notice of termination to be sent five days after they had entered a definitive Settlement and Sale Agreement. See Strong Depo. 95-96, 111-14, 140-41, 146-48, 205-08, 217-18, 259-60 (Apx. 72 at 212, 216-17, 223-25, 240, 243, 253). 15. On May 20, 2015, the day that the parties signed the Term Sheet, Geringer’s counsel confirmed that the Trustee’s understanding of Section 7 was correct. Email from R. Wynne to S. Marsden (May 20, 2015, 11:38 am) (Apx. 72 at 18). 16. Both parties recognized that the Term Sheet was not the final expression of their agreement, and that it would be superseded by and merged into a definitive Settlement and Sale Agreement. Strong Depo., 78-79 (Apx. 72 at 208); Geringer Declaration, Bankr. Dkt. 1105, ¶ 6 (Apx. 74 at 24). 17. At the time the parties signed the Term Sheet, they expected that they would be able to quickly negotiate and execute the Settlement and Sale Agreement. On May 20, 2015, the Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 35 of 58 xxxvi 4818-3538-1318\4 day the Term Sheet was signed, the Trustee’s counsel emailed Geringer’s counsel saying that the parties should “exchange drafts of moving papers and sales papers on Friday”—i.e., on May 22nd just two days later. Email from S. Marsden to R. Wynne (May 20, 2015, 9:51 am) (Apx. 72 at 19) (emphasis added). Geringer’s counsel agreed, saying “That should work.” Email from R. Wynne to S. Marsden (May 20, 2015, 10:24 am) (Apx. 72 at 18). 18. On May 27th, DSSIII’s counsel demanded “formal resolution” of the price reduction issue that DSSIII had first broached on May 12th. Email from J. Tew to R. Strong and P. Hunt (May 27, 2015, 12:07 pm) (Apx. 72 at 88). In response to DSSIII’s demand, the Trustee’s counsel wrote a brief email terminating the contract with DSSIII. Email from P. Hunt to J. Tew (May 29, 2015, 7:23 pm) (Apx. 72 at 87). 19. The Trustee’s email terminating the DSSIII Agreement was sent on Friday, May 29th—long before the expiration of DSSIII’s due diligence period. See First Amendment § 2(d) (Apx. 73 at 92). 20. DSSIII understood the Trustee’s May 29th email as an attempt to terminate the DSSIII Agreement, and resisted the Trustee’s attempt to terminate. Email from J. Tew to P. Hunt (May 30, 2015, 6:10 am) (Apx. 72 at 87). 21. The Term Sheet does not contain any formal or substantive requirements concerning the notice of termination to be sent under Section 7. The Term Sheet does not have a “time is of the essence” clause. Geringer is not given any right to review or approve the notice. See Term Sheet (Apx. 72 at 20-22). 22. DSSIII’s due diligence period did not end until June 30, 2015. First Amendment § 2(d) (Apx. 73 at 92). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 36 of 58 xxxvii 4818-3538-1318\4 23. DSSIII waived its due diligence on June 29, 2015, at 7:54 am, saying that it had “completed its feasibility review” and had “elected to proceed with the PSA in accordance with its terms.” Email from J. Tew to P. Hunt (June 29, 2015, 7:54 am) (Apx. 72 at 142). D. Geringer Cannot Provide Evidence Supporting Essential Elements of His Claims. 1. Statement of Legal Elements. To succeed on a claim for breach of contract or for breach of the covenant of good faith and fair dealing, Geringer must prove that the Trustee’s breach caused his damages. See Sanpete America, LLC, v. Willardsen, 2011 UT 48, ¶ 72, 269 P.3d 118, 132; Nuttall v. Berntson, 30 P.2d 738, 741 (Utah 1934); Am. West Bank Members, L.C. v. State, 2014 UT 49, ¶ 15, 342 P.3d 224, 230-31. Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate where a party fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp., v. Catrett, 477 U.S. 317, 322 (1986); Fed. R. Civ. P. 56(c). 2. Statement of Undisputed Material Facts. 24. There is no admissible evidence of causation. 25. DSSIII had been working on a development agreement with the Town of Smyrna, for six months before the Trustee and Geringer entered the Term Sheet. Affidavit of T. Reilly, Bankr. Dkt. 1123, ¶ 15 (Apx. 74 at 39-41). 26. This work included “substantial third-party planning, engineering, and design work, as well as six (6) months of negotiations and numerous meetings with the Town and its engineering consultants.” Id. at ¶ 15.a (Apx. 74 at 39). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 37 of 58 xxxviii 4818-3538-1318\4 27. On May 6, 2015, DSSIII closed on a piece of property that was adjacent to the Smyrna Property (the Saggiani Property), for which DSSIII “paid $1,250,000 . . . incurred over $15,000 in closing costs . . . and has a Promissory Note and Mortgage obligation with respect thereto, which cannot be canceled or avoided.” Id. at ¶ 15.e (Apx. 74 at 41). 28. On May 16, 2015, DSSIII signed a contract to purchase another piece of property that was adjacent to the Smyrna Property, which required DSSIII to pay another $195,000. Id. at ¶ 15.g (Apx. 74 at 41). 29. At the hearing held on July 14, 2015, the Bankruptcy Court stated: [I]t’s not unusual the trustee wouldn’t want to take more money, but I’m saying you’ve got a contract. Nobody, not this Court nor the district court for the Middle District of Tennessee, has made a determination on whether the contract’s been terminated between now and July 30th. * * * * [T]here is a pending -- a direct challenge to the trustee’s position [that DSSIII was in breach and had repudiated the DSSIII Agreement] pending in a federal district court in front of an article 3 judge who has jurisdiction over the matter. * * * * I think parties such as Drapac have a right to rely on orders of this Court approving contracts between fiduciaries that appear before this Court, and I am not going to allow the trustee on the state of the record to sell the property to somebody else when the buyer indicates that it is ready, willing, and able to perform according to the contract that it signed and that I approved. July 14 Hr’g Trans., 25-27 (Apx. 72 at 180-82). 30. At the hearing held on July 28, 2015, the Bankruptcy Court stated that Geringer’s and the Trustee’s “legal argument . . . supplemental declarations, factual averments” presented at the July 28th hearing did not “change much from two weeks ago.” July 28 Hr’g Trans., 33 (Apx. 74 at 219). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 38 of 58 xxxix 4818-3538-1318\4 31. The Bankruptcy Court further stated that it believed that the milestones in the DSSIII Agreement “were matters of best efforts, good faith, and commercially reasonable diligence rather than drop-dead, hard and fast obligations,” and that under applicable law, anticipatory repudiation required “a voluntary act which renders the party unable or apparently unable to perform the contract,” or, “words and conduct of the contracting party [that] amount to a total and unqualified refusal to perform the contract.” Id. at 34, 36 (Apx. 74 at 220, 222). 32. Finally, the Bankruptcy Court also stated that “an indication that more negotiations are sought is not a total or unqualified refusal to perform.” Id. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 39 of 58 1 4818-3538-1318\4 IV. ARGUMENT The First Amended Complaint’s breach of contract claim is based on the Term Sheet that the parties signed on or about May 20, 2015. It completely ignores the definitive Settlement and Sale Agreement. The First Amended Complaint refers to the Term Sheet as “the Agreement.”3 See FAC ¶ 9. Specifically, the First Amended Complaint alleges that the Trustee breached the Term Sheet by “fail[ing] and refus[ing] to send the required notice of termination of the DSSIII contact within five days, as required by the terms of the Agreement,” id. at ¶ 12, and by “electing to sell the Smyrna Property to DSSIII.” Id. at ¶ 19. The First Amended Complaint’s breach of duty of good faith and fair dealing is similarly based on the Term Sheet. The First Amended Complaint alleges that there was “an implied covenant of good faith and fair dealing in the Agreement,” id. at ¶ 25, and that the Trustee breached this covenant by “fail[ing] to send notice of termination of the contract to sell the Smyrna Property to DSSIII when required under the Agreement,” and by “encourag[ing] DSSIII to continue its efforts to complete due diligence on the Smyrna acquisition,” and by “sell[ing] the Smryna Property to DSSIII.” Id. at ¶ 30. The Court should grant the Trustee summary judgment on Geringer’s First Amended Complaint, for the following reasons. A. The Term Sheet Is Not a Binding Contract. The first insurmountable legal obstacle to Geringer’s claims is that the so-called “contract” on which they are based is not a binding contract. 3 This memorandum does not adopt Geringer’s nomenclature, except when quoting Geringer. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 40 of 58 2 4818-3538-1318\4 1. The Term Sheet Required Bankruptcy Court Approval Before It Could Be Enforceable. Under Bankruptcy Rule 9019, a settlement agreement with a Trustee is not enforceable until approved by the Bankruptcy Court. See In re Blehm Land & Cattle Co., 859 F.2d 137, 141 (10th Cir. 1988) (“[u]nder Bankruptcy Rule 9019, a settlement or compromise agreement between the trustee and a party must be approved by the court, after notice and hearing, to be enforceable”); Ritchie Capital Mgmt., L.L.C. v. Kelley, 785 F.3d 273, 279 (8th Cir. 2015); Reynolds v. Comm’r, 861 F.2d 469, 473 (6th Cir. 1988) (“[i]n bankruptcy proceedings, as distinguished from ordinary civil cases, any compromise between the debtor and his creditors must be approved by the court as fair and equitable”); In re Leslie Fay Cos., 168 B.R. 294, 305 (Bankr. S.D.N.Y. 1994) (“[c]ompromises may not be made in bankruptcy absent notice and a hearing and a court order”). Similarly, under 11 U.S.C. § 363(b)(1), a trustee may sell property of the estate outside of the ordinary course of business only with bankruptcy court approval, “after notice and a hearing.” As a result, a majority of courts hold that there is no contract prior to bankruptcy court approval. See In re Broadmoor Place Invs., L.P., 994 F.2d 744, 745 (10th Cir. 1993); In re Pyschrometric Systems, Inc., 367 B.R. 670, 676 (D. Colo. 2007) (citing cases); In re Landscape Properties, Inc., 100 B.R. 445, 447 (E.D. Ark. 1988) (although “denominated “real estate contract” there simply is no contract without bankruptcy court approval); In re Smith, Jr., 352 B.R. 500, 501 (“[c]ourt approval is a prerequisite before a contract can become binding upon the bankruptcy estate”); Siddiqui v. Gardner, 327 B.R. 578, 583 (E.D. Va. 2005); Horse Haven, Inc. v. Stephens, 1990 U.S. App. LEXIS 27033, at *3 (4th Cir. June 19, 1990) (unpublished); In re Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 41 of 58 3 4818-3538-1318\4 SpecialtyChem Prods. Corp., 372 B.R. 434, 438-39 (E.D. Wis. 2007); In re Asia Global Crossing, 326 B.R. 240, 256 (S.D.N.Y. 2005). Time and again courts have held that “contracts”—like the Term Sheet here—do not bind a Trustee prior to bankruptcy court approval. For instance, in In re Broadmoor, 994 F.2d 744, a debtor had signed an agreement in June of 1990 to sell a building to a buyer, G-K. Later, in August, Broadmoor signed another agreement to sell the same building to a different buyer, Robinson. Over G-K’s objection, the bankruptcy court approved the sale to Robinson. On appeal, the Tenth Circuit held that the bankruptcy court had properly approved the sale to the second buyer. In so ruling, the Tenth Circuit pointed out that “[w]hile G-K calls its collective signed instruments here a ‘contract,’ this is a misnomer since there can be no contract in this situation without Bankruptcy Court approval. Accordingly, these instruments are but binding bids, and we so refer to them hereafter.” Id. at 745 n. 1. In another case, In re Git-N-Go, Inc., 322 B.R. 164 (Bankr. N.D. Okla. 2004), debtor GNG entered into an agreement with Brinks, Incorporated, which settled claims between the parties based on an earlier contract and provided that Brinks would continue rendering services to the debtor. GNG did not seek approval of the agreement from the bankruptcy court. Relations between the parties eventually soured, and when Brinks asked the bankruptcy court to enforce the agreement, the court refused to do so because the parties had failed to get bankruptcy court approval pursuant to Bankruptcy Rule 9019. “Since no notice of the compromise or opportunity for hearing was afforded to creditors of the estate, the Court has no choice but to . . . declare the 2004 Agreement unenforceable.” Id. at 176. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 42 of 58 4 4818-3538-1318\4 Just as in these cases, the Term Sheet was not enforceable against the Trustee because the Bankruptcy Court never entered an order approving a contract to sell the Smyrna Property to Geringer or to settle the Trusts’ claims against him. See SOF ¶¶ 1-4. 2. The Term Sheet Was Subject to Express Conditions Precedent, Which Did Not Occur. Independent of the requirements of bankruptcy law, the Term Sheet is unenforceable because it was expressly conditioned on two precedent events,4 and neither of these events occurred. Summary judgment must be granted against Geringer on the claims alleged in the First Amended Complaint for this reason as well. Under Utah law, “the parties to [a] contract have no duty to perform until the condition is fulfilled, so the failure of a condition relieves the parties of all of their contractual duties.” Mind & Motion Utah Investments, LLC v. Celtic Bank Corp., 2016 UT 6, ¶ 20, 367 P.3d 994, 1000 (emphasis added); see also McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 12 ¶ 29, 274 P.3d 981, 987-88 (“no duties arise between the contracting parties until the condition has been fulfilled”) (emphasis added).5 Accordingly, “parties whose obligations are dependent on a condition precedent have no right to contract remedies until that condition is fulfilled and a 4 “A condition is an event not certain to occur, which must occur before performance under a contract becomes due.” Mind & Motion Utah Investments, LLC v. Celtic Bank Corp., 2016 UT 6, ¶ 20, 367 P.3d 994, 1000. Failure of a condition dooms Geringer’s good faith claim as well. If there is no valid contract, there can be no cause of action for breach of the covenant of good faith and fair dealing. Tomlinson v. NCR Corp., 2014 UT 55, ¶ 32, 345 P.3d 523, 531; Mountain Highlands, LLC v. Hendricks, 616 F.3d 1167, 1171 (10th Cir. 2010). 5 To the extent that California law is relevant, it is to the same effect. Siqueiros v. Fannie Mae, 2015 U.S. Dist LEXIS 71286, *18-19 (C.D. Cal June 1, 2015) (a claim for breach of the covenant of good faith and fair dealing requires that “any conditions precedent to the defendant’s performance occurred”); cf. Racine & Laramie, Ltd., v. Dept. of Parks and Recreation, 11 Cal. App. 4th 1026, 1032, 14 Cal. Rptr.2d 335 (1992) (“[t]here is no obligation to deal fairly or in good faith absent an existing contract”). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 43 of 58 5 4818-3538-1318\4 binding covenant is thereby formed.” Id. ¶ 30 (citing 8–30 CORBIN ON CONTRACTS § 30.12). Said a different way, “the failure of a condition relieves the parties of all of their contractual duties.” Mind & Motion, 2016 UT 6, ¶ 20, 367 P.3d 994, 1000. The Term Sheet contains at least two conditions. Paragraph 10 of the Term Sheet states that “[t]his MOU is subject to the approval of the bankruptcy court, and the Trustee’s ability to terminate the current purchase contract.” Term Sheet, ¶10 (Apx. 72 at 21). Thus, even ignoring the requirements of bankruptcy law in this case, the parties expressly agreed that two events had to happen before the Term Sheet could be effective: (1) “the approval of the bankruptcy court”; and (2) a determination that the Trustee was “ab[le] to terminate the current purchase contract.” Id. It cannot be disputed that the Bankruptcy Court did not enter an order approving the Term Sheet (or otherwise allow the sale of the Smyrna Property to Geringer or approve settlement of the Trusts’ claims against Geringer). See SOF ¶¶ 1-4. It is also beyond dispute that the Bankruptcy Court did not allow the Trustee to terminate the DSSIII Agreement. See SOF ¶ 4. Indeed, on July 14, 2015, the Bankruptcy Court held an emergency hearing at which it heard DSSIII’s objections to the Trustee’s proposed sale to and settlement with Geringer. At that hearing, the Bankruptcy Court continued, without date, any hearings on the Trustee’s motions regarding the proposed Settlement and Sale Agreement with Geringer. This action effectively denied the Trustee’s Sale Motion. Order Continuing Hearings without Date, Bankr. Dkt. 1130 (Apx. 72 at 965-66). Since neither of the two express conditions stated in the Term Sheet was satisfied, there was no contract to breach. As the Utah Supreme Court said in Mind & Motion, “parties have no Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 44 of 58 6 4818-3538-1318\4 remedy for breach of contract if a condition is not fulfilled, because at that point, there is simply no contract to breach.” 2016 UT 6, ¶ 20, 367 P.3d 994, 1000; see also McArthur v. State Farm Auto. Ins. Co., 2012 UT 12 ¶ 29-30, 274 P.3d 981, 987-88; Meruelo v. Robles, 329 B.R. 350, 355-56 (S.D. Fla. 2005) (under Florida law, no breach of contract because condition of bankruptcy court approval not satisfied); In re Big River Electric Corp., 233 B.R. 726, 733-34 (W.D. Ky. 1998) (under Kentucky law, debtor had no liability under agreement that was expressly conditioned on bankruptcy-court approval). B. To the Extent Bankruptcy Law and Failure of Express Conditions Did Not Render the Term Sheet Inoperative, It Was Superseded by the Settlement and Sale Agreement. The parol evidence rule “operates, in the absence of fraud or other invalidating causes, to exclude evidence of contemporaneous conversations, representations, or statements offered for the purpose of varying or adding to the terms of an integrated contract.” Tangren Family Trust v. Tangren, 2008 UT 20, ¶ 11, 182 P.3d 326, 330. An “integrated” contract is one that the parties have adopted “as the final and complete expression of their bargain.” Id. ¶ 12. Frequently, parties incorporate “integration clauses” in order “to signal to the courts that the parties agree that the contract is to be considered completely integrated.” Id. ¶ 13. Where the court is faced with “a completely integrated agreement,” the parol evidence rule requires that it be “interpreted on its face,” and “preclude[s] the subsequent introduction of evidence of preliminary negotiations or of side agreements.” Id. Said another way, where there is an integrated agreement, any preliminary agreements the parties may have had about a given subject during the course of negotiations are irrelevant. Courts are required to “assume that a writing dealing with the same subject was intended by the Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 45 of 58 7 4818-3538-1318\4 parties to supersede any prior or contemporaneous agreements.” Novell, Inc. v. Canopy Grp., Inc., 2004 UT App 162 ¶ 14, 92 P.3d 768, 772. In Ringwood v. Foreign Auto Works, Inc., 671 P.2d 182, 183 n. 2 (Utah 1983), the Utah Supreme Court explained that, “[i]n a broad sense any time a contract supersedes and incorporates all or part of an earlier agreement it may be said that the earlier agreement is merged into the later. In this sense a substituted contract results in a discharge by merger. Also an earlier tentative agreement is merged into an integration.”6 In this case, the relevant facts are undisputed: (1) Neither of the parties thought that the Term Sheet was the final expression of their agreement. SOF ¶¶ 14-16; (2) After the Term Sheet was signed, the parties continued to negotiate and to memorialize their prior tentative agreement, and on June 30, 2015 they executed the Settlement and Sale Agreement, as the final expression of their agreement. SOF ¶¶ 8-10, 16-17; (3) The Settlement and Sale Agreement covered the same subject matter as the Term Sheet and—unlike the Term Sheet— it contained an integration clause. SOF ¶¶ 9-10; (4) The Settlement and Sale Agreement addressed the subject of providing DSSIII notice of termination, stating that “[o]n June 30, 2015, the [Trustee] served a Notice of Termination of Real Estate Purchase and Sale Agreement on DSSIII in accordance with its duty as a fiduciary to accept any higher and better offers for the purchase of the Property.” SOF ¶ 11. Under Utah law, the effect of these undisputed facts is that the Settlement and Sale Agreement superseded the Term Sheet. Any promises in the Term Sheet were merged into the Settlement and Sale Agreement. The Term Sheet is legally irrelevant because, “the later 6 Ringwood has been overruled by Tangren Family Trust v. Tangren, 2008 UT 20, 182 P.3d 326, but not on this point. In Ringwood the court had admitted extrinsic evidence on the question of integration. Tangren held that the presence of an integration clause conclusively establishes that an agreement is integrated, and prevents the introduction of extrinsic evidence on the topic. Tangren, 2008 UT 20, ¶ 16, 182 P.3d 326, 331. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 46 of 58 8 4818-3538-1318\4 agreement discharges the antecedent ones in so far as it contradicts or is inconsistent with the earlier ones.” Novell, Inc., 2004 UT App 162, ¶ 11, 92 P.3d 768, 772. C. To the Extent that the Term Sheet Was Binding and Not Superseded by the Settlement and Sale Agreement, the Undisputed Facts Show the Trustee Did Not Breach It. Geringer’s breach of contract claim is based on his contention that the Trustee was required to send DSSIII a notice of termination within five days of the execution of the Term Sheet and that the Trustee failed to do so. See FAC ¶ 18. The undisputed evidence contradicts Geringer’s claim. 1. The Term Sheet’s Requirements. The First Amended Complaint implicitly alleges that the Term Sheet tied sending notice of termination to execution of the Term Sheet. See id. But Geringer’s self-serving interpretation of the Term Sheet is not supported by either the plain language of the Term Sheet or the relevant extrinsic evidence. The plain language of the Term Sheet does not anchor notice of termination to execution of the Term Sheet. Section 7 says only: The Trustee will within 5 days provide notice of termination of the contract to sell the Smyrna to DSSIII and will provide notice of this sale and of the motion to approve this sale to DSSIII Holding Co., LLC. Term Sheet, ¶ 7 (Apx. 72 at 21). The question left open by the Term Sheet’s language is, precisely, “within five days of what?” To answer this question, the Court must examine the relevant extrinsic evidence. It points solely in one direction: notice of termination was to be sent within five days after the parties executed the definitive Settlement and Sale Agreement. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 47 of 58 9 4818-3538-1318\4 First, at his deposition, the Trustee consistently testified that his intent and understanding of Section 7 was that it required notice of termination to be sent only after the parties had entered a definitive agreement. See Strong Depo. 95-96, 111-14, 140-41, 146-48, 205-08, 217-18, 259- 60 (Apx. 72 at 212, 216-17, 223-25, 240, 243, 253). Reading Section 7 the way Geringer does is contrary to this testimony, and contrary to common sense. It would mean that the Trustee agreed to give up a contractual “bird in the hand” (the DSSIII Agreement) before Geringer “came out of the bush” and agreed to definitive documents. Second, the Trustee’s understanding of Section 7 was explicitly confirmed by Geringer’s counsel on the day that the parties signed the Term Sheet. On May 20th, the Trustee’s counsel wrote to Geringer’s counsel, saying: We’re working on a written notice of termination to the current buyer and a potential ambiguity came up. We’re intending to send it within five days of the time we sign the sales agreement. Is that what you understood? Is that ok? Email from S. Marsden to R. Wynne (May 20, 2015, 11:35 am) (Apx. 72 at 18) (emphasis added). Geringer’s counsel responded immediately: That’s fine, the sooner the better I would think. I’m on a conference call, will call you later to understand this ambiguity. Email from R. Wynne to S. Marsden (May 20, 2015, 11:38 am) (Apx. 72 at 18). These facts are indisputable. This is what was said at the time. Third, the Trustee’s deposition testimony and Geringer’s counsel’s email are consistent with the extrinsic evidence regarding the context of the parties’ negotiations. The undisputed evidence shows that neither party thought the Term Sheet was definitive, and that both parties expected the Term Sheet would, in short order, be merged into a full and complete agreement Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 48 of 58 10 4818-3538-1318\4 that would supersede the Term Sheet, and that would contain numerous additional material terms. SOF ¶¶ 5, 14-17. Unfortunately, the process of negotiating and drafting the definitive Settlement and Sale Agreement took longer than the parties expected— largely due to Geringer’s delay. See supra p. xvi-xix. As the end of June approached with no definitive documents signed, Geringer’s counsel apparently recognized that DSSIII was continuing its progress to closing the DSSIII Agreement. Faced with this fact, Geringer’s counsel began asserting that notice of termination was tied to the Term Sheet, not the Settlement and Sale Agreement. Supra p. xx-xxii. The Trustee immediately told Geringer that he was wrong, supra p. xxi, but that is beside the point. The important point is that this exchange is long after the Term Sheet was signed, and therefore, not relevant. One party’s after the fact, self-serving, declarations or interpretations of an agreement are not relevant extrinsic evidence. See Viesti Assocs. v. Pearson Educ., Inc., 2014 U.S. Dist. LEXIS 35939, at *35 (D. Colo. Mar. 19, 2014) (requiring contemporaneous evidence to interpret a contract and rejecting conclusory and self-serving declarations filed later during litigation). 2. Timely Notice Was Sent. The next problem is that even if the Court were to accept Geringer’s reading of Section 7, the undisputed facts show that the Trustee sent DSSIII a timely notice of termination.7 7 The Trustee’s substantial compliance with Section 7 of the Term Sheet also dooms Geringer’s good faith claim. The implied covenant of good faith and fair dealing cannot create “new, independent rights or duties not agreed upon by the parties.” Cook v. Zions First Nat’l Bank, 919 P.2d 56, 60 (Utah Ct. App. 1996). Thus, “where there is no breach of an express covenant in a contract, there can be no cause of action for breach of an implied covenant arising therefrom.” Glob. Fitness Holdings, LLC v. Fed. Recovery Acceptance, Inc., 127 F. Supp. 3d 1176, 1196 (D. Utah 2015). Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 49 of 58 11 4818-3538-1318\4 On May 27th, DSSIII’s counsel demanded “formal resolution” of the price reduction issue that DSSIII had first broached with the Trustee on May 12th. Email from J. Tew to R. Strong and P. Hunt (May 27, 2015, 12:07 pm) (Apx. 72 at 88). In response to DSSIII’s demand, the Trustee’s counsel wrote a brief email to DSSIII terminating the DSSIII Agreement. The Trustee’s counsel’s email said, Joel and group, Based on the conversations that we had and our analysis since, the Trustee does not think it is in our mutual best interests to continue to pursue this transaction. Email from P. Hunt to J. Tew (May 29, 2015, 7:23 pm) (Apx. 72 at 87). This email was sent on Friday, May 29th—long before the expiration of DSSIII’s due diligence period. See First Amendment § 2(d) (Apx. 73 at 92). Although the email was polite, DSSIII clearly understood it as an attempt to terminate the DSSIII Agreement. On Saturday morning, DSSIII responded saying: “We certainly do not agree to any termination of the existing PSA at this point in time; instead, we need to mutually discuss how to consummate a transaction that works for both parties.” Email from J. Tew to P. Hunt (May 30, 2015, 6:10 am) (Apx. 72 at 87) (emphasis added). The Term Sheet does not contain any formal or substantive requirements concerning the notice of termination to be sent under Section 7. The Term Sheet does not have a “time is of the essence” clause. Geringer is not given any right to review or approve the notice. See Term Sheet (Apx. 72 at 20-22). In these contractual circumstances, the Trustee’s May 29th notice fully complied with any obligation that the Trustee might have had even under Geringer’s reading of the Term Sheet. See Reliance Ins. Co. v. Utah Dep't of Transp., 858 P.2d 1363, 1370 Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 50 of 58 12 4818-3538-1318\4 (Utah Sup.Ct. 1993) (“A party has substantially performed when the only variance from the strict and literal performance consists of technical or unimportant omissions or defects.”); Cent. Utah Water Conservancy Dist. v. Upper E. Union Irrigation Co., 2013 UT 67, ¶ 25 n.2, 321 P.3d 1113, 1120. D. Geringer Cannot Provide Evidence Supporting Essential Elements of His Claims. Finally, summary judgment must be granted against Geringer because he has not, and cannot, adduce admissible evidence to support essential elements of his claims. It is undisputed that the Trustee sent DSSIII communications purporting to terminate the DSSIII Agreement on May 29th, June 30th, and July 14th. Email from P. Hunt to J. Tew (May 29, 2015, 7:23 pm) (Apx. 72 at 87); Letter from P. Hunt to T. Reilly (June 30, 2015) (Apx. 72 at 145-46); Letter from P. Hunt to T. Reilly (July 14, 2015) (Apx. 72 at 154-55). The gravamen of the First Amended Complaint is the claim that the Trustee’s failure to send a “notice of termination” on May 25, 2015 (as opposed to on May 29th, June 30th, or July 14th), caused the express conditions of paragraph 10 of the Term Sheet (bankruptcy court approval and termination of the DSSIII Agreement) to fail, and caused the Term Sheet to fail. See FAC ¶¶ 15, 19, 21. Logically, Geringer’s claim requires him to prove one of two things: (i) that in the face of a May 25th notice DSSIII would have acted differently and in particular that it would have acquiesced in the termination of its rights under the DSSIII Agreement, rather than vigorously fighting termination as it undisputedly did, or (ii) that the Bankruptcy Court would have come to a different conclusion than it did, despite DSSIII’s resistance. See Sanpete America, LLC, v. Willardsen, 2011 UT 48, ¶ 72, 269 P.3d 118, 132; Nuttall v. Berntson, 30 P.2d 738, 741 (Utah Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 51 of 58 13 4818-3538-1318\4 1934); Am. West Bank Members, L.C. v. State, 2014 UT 49, ¶ 15, 342 P.3d 224, 230-31; National Market Share, Inc., v. Sterling Nat. Bank, 392 F.3d 520, 526-27 (2nd Cir. 2004) (“plaintiff may recover only for damages that are ‘direct[ly] and proximate[ly] caused by defendants’ breach of contract, causation is an element—and a crucial one—of plaintiff’s prima facie case”); Restatement (Second) of Contracts, § 347; USA Power, LLC v. PacifiCorp, 2016 UT 20, ¶ 136, 372 P.3d 629, 678 (one event following another is not evidence of causation). There is no evidence to support either of these two logical requisites—only Geringer’s speculation. 1. Evidence of What DSSIII Would Have Done. The fundamental problem is that neither Geringer nor the Trustee can testify about what DSSIII “would have done” in a different set of circumstances. See Fed. R. Evid. 602. There is no admissible evidence on this topic from DSSIII, and discovery is closed. See Dkt. 71. Moreover, any testimony DSSIII might provide regarding what it “would have done” in a set of circumstances that did not occur would, in any event, be inadmissible speculation. See 32 C.J.S. § 693 (March 2017) (“Speculative testimony concerning what a party would have done under different circumstances is generally not admissible. Therefore, the court will ordinarily reject a mere supposition of a witness as to what would have happened if something had occurred which did not, or something had not occurred which did, or as to what the witness would have done under a hypothetical state of facts.”); Argo v. Blue Cross & Blue Shield, 452 F.3d 1193, 1199-1200 (10th Cir. 2006); Judricks Enterprises, Ltd., v. Caterpillar, Inc., 1998 U.S. App. LEXIS 20540, at *16 (7th Cir. Aug. 19, 1998) (affidavit properly excluded on summary judgment because witness’s “views on what would have happened” are speculation, not Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 52 of 58 14 4818-3538-1318\4 evidence); Bridgen v. Scott, 456 F. Supp. 1048, 1065 (S.D. Tex. 1978) (“Vague, self-serving speculative testimony concerning what a party would have done under different circumstances is generally not admissible.”). Finally, the evidence that does exist shows that DSSIII was irretrievably committed to the Smyrna Property well before May 25th. In connection with its opposition to the Trustee’s Sale Motion, DSSIII submitted declarations to demonstrate that DSSIII had been working on developing the Smyrna property since at least January 2015, and had committed substantial resources to the Smyrna Project. DSSIII testified (i) that on May 6, 2015, it had closed on a piece of property that was adjacent to the Smyrna Property and would be included in DSSIII’s development for which DSSIII “paid $1,250,000 . . . incurred over $15,000 in closing costs . . . and has a Promissory Note and Mortgage obligation with respect thereto, which cannot be canceled or avoided”; and (ii) that on May 16, 2015, DSSIII had signed a contract to purchase another piece of property that was adjacent to the Smyrna Property, and would be included in DSSIII’s development which required DSSIII to pay another $195,000. Affidavit of T. Reilly, Bankr. Dkt. 1123, ¶ 15 (Apx. 74 at 39-41). Under the DSSIII Agreement, DSSIII was paying only $1,500,000 for the Smyrna Property itself. See DSSIII Agreement (Apx. 73 at 23). So, the undisputed facts are that weeks before the May 25, 2015 “deadline” for notice from the Trustee, DSSIII had spent as much on additional property integral to its real estate development, as it was obligated to spend on the Smyrna Property itself under the DSSIII Agreement. In these circumstances, it is not reasonable to say that DSSIII would have retreated from the Smryna Property, if only the Trustee had sent notice of termination on May 25th. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 53 of 58 15 4818-3538-1318\4 In short, there is no evidence from which a jury could conclude that DSSIII would have acted any differently had it received a notice of termination on May 25th, and substantial evidence that DSSIII was irretrievably committed well before then. 2. Evidence of What the Bankruptcy Court Would Have Done. Geringer is in an even worse position with respect to providing evidence to show that the Bankruptcy Court would have come to a different conclusion had a notice been sent on May 25th. Geringer has not sought to depose Judge Marker, and any attempt to do so would necessarily intrude on Judge Marker’s deliberative thought processes, and would be inadmissible. See Menzies v. State, 2014 UT 40, ¶ 207, 344 P.3d 581, 630; Rubens v. Mason, 387 F.3d 183, 191 (2nd Cir. 2004) (“testimony revealing the deliberative thought processes of judges, juries or arbitrators is inadmissible”); Fayerweather v. Ritch, 195 U.S. 276, 306-07 (1904). Thus, we are left with the Bankruptcy Court’s ruling, and his statements at the hearings held on July 14th and July 28th. The transcripts of these hearings do not in any way address what the court would have done if a notice had been sent on May 25th. To the extent they shed any light on this issue at all, they support the conclusion that the date of notice was irrelevant to the court’s decision. Rather, the court’s refusal to even hold a hearing on the Sale Motion appears to be principally driven by the court’s concern that the Sale Motion sought to overturn a contract that the Bankruptcy Court had approved, and that DSSIII still had the ability to close. At the end of the July 14th hearing, the court said: [I]t’s not unusual the Trustee wouldn’t want to take more money, but I’m saying you’ve got a contract [with DSSIII]. Nobody, not this Court nor the district court for the Middle District of Tennessee, has made a determination on whether the contract’s been terminated between now and July 30th. Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 54 of 58 16 4818-3538-1318\4 * * * * [T]here is a pending -- a direct challenge to the trustee’s position [that DSSIII was in breach and had repudiated the DSSIII Agreement] pending in a federal district court in front of an article 3 judge who has jurisdiction over the matter. * * * * I think parties such as Drapac have a right to rely on orders of this Court approving contracts between fiduciaries that appear before this Court, and I am not going to allow the Trustee on the state of the record to sell the property to somebody else when the buyer indicates that it is ready, willing, and able to perform according to the contract that it signed and that I approved. July 14 Hr’g Trans., 25-27 (Apx. 72 at 180-82). The Bankruptcy Court essentially reiterated this position at the July 28th hearing. The court said that Geringer’s and the Trustee’s “legal argument . . . supplemental declarations, factual averments” presented at the July 28th hearing did not “change much from two weeks ago.” July 28 Hr’g Trans., 33 (Apx. 74 at 219). The court still believed that the milestones in the DSSIII Agreement “were matters of best efforts, good faith, and commercially reasonable diligence rather than drop-dead, hard and fast obligations,” and that under applicable law, anticipatory repudiation required “a voluntary act which renders the party unable or apparently unable to perform the contract,” or, “words and conduct of the contracting party [that] amount to a total and unqualified refusal to perform the contract.” Id. at 34, 36 (Apx. 74 at 220, 222). “[A]n indication that more negotiations are sought,” the court continued, “is not a total or unqualified refusal to perform.” Id. 3. Intervening Cause. Beyond the complete lack of evidence of causation in the first instance, Geringer also cannot provide evidence to show that the numerous other obstacles that existed to a successful sale would not be intervening causes of the failure. See National Market Share, 392 F.3d at 527 Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 55 of 58 17 4818-3538-1318\4 (lack of intervening cause is “necessarily an element of the plaintiff’s case in chief”); Fed. Deposit Ins. Corp. v. Haines, 3 F.Supp.2d 155, 166 (D.Conn.1997) (Connecticut law); Resolution Trust Corp. v. KPMG Peat Marwick, 845 F.Supp. 621, 622, 625 (N.D.Ill.1994) (defense that claims were barred by “causation in fact, proximate cause, intervening cause” was “not an affirmative defense” but merely “an assertion that [plaintiff] cannot prove a necessary element of its claim”); E.I. du Pont de Nemours & Co. v. McCain, 414 F.2d 369, 374 (5th Cir.1969) (lack of “new and independent cause is not an affirmative defense; it is but an element to be considered by the jury in determining the existence or non-existence of proximate cause”). Two of these obstacles are worth pausing on, because they are insurmountable. First, DSSIII Agreement did not allow for immediate termination of the contract by the Trustee/Seller. Rather, section 15.1 of the DSSIII Agreement required the Trustee to first give written notice to DSSIII of any claim of breach of any term or provision of the DSSIII Agreement. DSSIII then had five business days to cure the default. The DSSIII Agreement could be terminated only if DSSIII did not cure the default. DSSIII Agreement § 15.1 (Apx. 73 at 40). Given DSSIII’s undisputed actions in the case, the five day notice provision is an insurmountable obstacle to the Geringer sale. Second, several parties objected to the proposed sale to Geringer, and they did so on grounds completely unrelated to any notice of termination. Austin, Green, and Grundy, for instance, objected to the Sale Motion on the ground that it was in fact a settlement with Geringer, and as such it would have to be evaluated under Bankruptcy Rule 9019. See Joint Objection, Bankr. Dkt. 1125 (Apx. 74 at 47-48). DSSIII objected on this ground as well. DSSIII Emergency Request, Bankr. Dkt. 1113 at 5, ¶ 20 (Apx. 74 at 31-32). Austin’s objection noted Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 56 of 58 18 4818-3538-1318\4 that one of the factors the Bankruptcy Court is required to consider under Rule 9019 is “the interest of creditors.” Joint Objection, Bankr. Dkt. 1125, ¶ 7 (Apx. 74 at 47). Austin then pointed out that since DSSIII had objected to the sale and commenced litigation to preserve the DSSIII Agreement, under Rule 9019, “[t]he result is that the cost to the Estate of breaching its agreement with D[S]SIII may dwarf any expected benefit from a settlement with Mr. Geringer.” Id. at ¶ 9 (Apx. 74 at 48). Geringer has not, and cannot, provide any non-speculative evidence that these independent objections would have been overcome. V. CONCLUSION For the reasons expressed herein, the Trustee requests that his motion for summary judgment be granted, and that the Court enter judgment in the Trustee’s favor on the claims of the First Amended Complaint. DATED this 26th day of April, 2017. DORSEY & WHITNEY LLP /s/ Milo Steven Marsden Milo Steven Marsden Peggy Hunt Sarah Goldberg John J. Wiest Attorneys for D. Ray Strong, Liquidating Trustee Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 57 of 58 19 4818-3538-1318\4 CERTIFICATE OF SERVICE I hereby certify that on this 26th day of April, 2017, I served a true and correct copy of the foregoing MOTION FOR SUMMARY JUDGMENT AND MEMORANDUM IN SUPPORT on the following: Richard Wynne Kerry Fowler JONES DAY 555 South Flower St., Fiftieth Floor Los Angeles, CA 90071 rlwynne@jonesday.com kcfowler@jonesday.com ☐ U.S. Mail ☐ Federal Express ☐ Hand-Delivery ☐ Telecopy ☐ Email ☒ ECF George Hofmann Adam Reiser COHNE KINGHORN, P.C. 111 East Broadway, 11th Floor Salt Lake City, UT 84111 ghofmann@cohnekinghorn.com areiser@cohnekinghorn.com ☐ U.S. Mail ☐ Federal Express ☐ Hand-Delivery ☐ Telecopy ☐ Email ☒ ECF /s/ Milo Steven Marsden Case 2:16-cv-00391-TC Document 76 Filed 04/26/17 Page 58 of 58